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Efficiency and innovation emphasised

LOGISTICS and transportation firms mimic the development of their customers; thus they grew in Slovakia during the boom years and experienced difficulties during recent years of slow growth. That has brought challenges in the form of pressure for lower prices, improved service, flexibility and innovation.

LOGISTICS and transportation firms mimic the development of their customers; thus they grew in Slovakia during the boom years and experienced difficulties during recent years of slow growth. That has brought challenges in the form of pressure for lower prices, improved service, flexibility and innovation.

The Slovak Spectator (TSS): How has the role of a provider of logistics and transport services changed over the last 10 years?Denis Renard (DR): It is not only in Slovakia, but since the crisis started, the different crises we went through in Slovakia had different consequences. The first is our customers, mainly industrial in our case, who had to cut costs in order to compensate the consequence of the crisis. Therefore we were pushed down in terms of prices because this is always the first reaction, and together with this we had to provide an even higher level of quality. Of course, the crisis brought pressure on performance as well and in some cases on volume, especially in western countries. Slovakia as well as some other CEE countries somehow benefited from this situation because big international industrial companies re-distributed their production where labour was more attractive and cost effective.

Markus Jelleschitz (MJ): The importance of Slovakia as a hub for central and eastern Europe has increased in the recent years.

This is mainly due to the ever-growing settlement of automotive suppliers in the west of the country, which also leads to the development of several logistics centres in Slovakia.As a result, the demand on logistics service providers is rising, due to the fact that the automotive industry is looking for service providers with international close-meshed networks, which can provide a transparent, cost-efficient and effective supply chain solution.

Dietmar Schmickl (DS): Changes in the role of logistics providers are mainly influenced by the changes in the overall market environment and customer demands. In comparison with the past, clients are far more demanding when it comes to quality measures.

High performance standards set by the automotive industry are adopted in other industries as well. In order to help customers achieve higher performance levels, the role of logistics companies changes from providers of transport capacities connecting geographical points, to strategic business partners. Logistics becomes a key strategic success factor as the whole production is built on sophisticated logistics solutions.

Roman Stoličný (RS): Changes in logistics over the last decade reflect large changes which have taken place in global industry and trade. The need to reduce costs in manufacturing and trade resulted in a growing outsourcing of logistics. Companies have also strongly pressed on speeding up transport and creating smaller transportation units with a defined transport time over the last few years. These market demands, along with continuing globalisation of international trade, lead on the side of logistics providers to creation of transportation networks and large logistics hubs. This way they increase their ability to respond flexibly to changes in the market and changing requirements of clients. All these would be not possible today without the use of IT technologies, which have become part of logistics know-how. The trend is toward mass processing of data for logistics purposes and a simple access to them.

Mária Džundová (MD): The logistics sector went through several phases of development during the last decade. Before Slovakia’s entry into the EU between 2001 and 2004, the main role of the carrier was to ship goods from the point A to point B and clear them quickly and without any problems through customs. The latter was the biggest challenge at that time. Between 2004 and 2008, Slovak companies experienced, and along with them logistics providers, an unusual boom. Demand for transportation services was huge. Companies active in this sector were buying trucks in the hundreds and demand for transportation capacities kept growing. At that time especially sufficient capacities for reasonable prices were required from a carrier. Foreign investors required assistance with moving their plants. After the crisis there occurred a significant pressure on prices. Only providers, who kept their quality of their services and were able to offer them for reasonable prices have survived.

During recent years there has been significant growing demand for added-value services like monitoring transported freights, their reporting and service performance or consultancy services when solving logistics tasks and all these, of course, free of charge.

TSS: What are the biggest challenges providers of logistics and transport services face?DR: The biggest challenge is to keep growing with the aim to be profitable. Because of the difficult market this is not easy to manage. So, we need to improve our performance to provide innovative optimisation solutions. At this moment the main target or aim of many industrial customers is to decrease the number of providers they are using in order to choose a bigger player able to cover the entire supply chain as well as to cover a large geographical area. This is a more and more clear trend on the market. As well, the price issue is becoming a little less significant. I would not say it’s secondary, but we can see some of our customers are willing to choose providers for reliability over price. This is because if the service provider is not reliable they will suffer in front of their customers and especially when we talk about more seasonal products. The expectations are very high from their point of view.

I would say one of the big consequences is also that since we have been exporting a lot from Slovakia even while the local market is flat, the flow and balance is even worse than before. This is impacting the situation because we can say that at peak seasons when you send one truck to France it’s hard to find one to send back to Slovakia. This is an increased difficulty at the moment.

MJ: Related to the challenges of logistic service providers, the so called 5 V’s are indispensible and becoming more and more important with increased supply chain integration: value, velocity, variability, visibility and vulnerability.

One of the biggest challenges in this case is information sharing along the supply chain, which constitutes the basis of track and tracing. Particularly the integration of different systems along the supply chain will defy the IT-departments of logistic service providers.

DS: The biggest challenge is to provide innovative, efficient and also sustainable solutions, while being confronted with the ongoing extreme price pressure in the whole logistics and transport industry.

RS: In general, today large flexibility and ability to respond quickly to requirements of customers is more expected from a logistics provider than before. Moreover, the continuing globalisation of trade erases state borders and thus, for example, in ground transportation I see competition between individual countries of central and eastern Europe. This puts completely different requirements on Slovak companies when it comes to competitiveness. And thus the biggest problems our sector faces are those, on which we have only a little impact – density and quality of transport infrastructure and legislative measures and so on. Because here in Slovakia we still are waiting for completion of the highway connection with the east of the country and we, for example, have to respond also to an increasing pressure to reduce emissions. This is, of course, a right step, but stimuli supporting such investments into transportation capacities, for example in a form of reduced highway fees, should be much bigger. Another influence on our business longer term is the increased cost of motor fuels.

MD: In order for a provider of transportation services to stay within this highly competitive environment, one must provide super quality for reasonable price. One can manage this only when they employ very talented, experienced and educated people, who are dedicated, motivated and customer-oriented.

TSS: Where do you see potential for development of logistics and transport services in Slovakia?DR: The trend to me is quite clear and the industry is really attracted to Slovakia for two main reasons. First, Slovakia offers cost-effective labour. The second reason is the geographical position of Slovakia, which is unique. And probably a third, lesser reason is that Slovakia is the only country within this region completely integrated in the EU including euro currency. So all together I think we will continue to benefit from this attractive point and I believe we will continue to grow.

It is clear that we regularly see industrial international companies investing in Slovakia. So this might continue. The question is always what will be the pace of these investments, but it’s clear that being on the border between east and west is always quite an interesting benefit. So we expect the potential of the market to continue to grow, and faster than in western Europe.

MJ: Slovakia has still a large backlog in development of infrastructure and education of people in the logistics sector. Therefore it is mandatory in the near future to upgrade the road network, especially in the middle and east of Slovakia to keep the competition in the region with Poland, the Czech Republic and Hungary ongoing. Besides that, it is important to focus developing people with logistics expertise.

DS: DB Schenker has the rail expertise of the largest European rail freight company and we see great potential in the increasing demand for alternative transport modes, not only among international companies in industries like automotive and electronics, but also in the SME segment. Another important market trend is e-commerce and demand for B2C services. The ongoing switch to direct deliveries to end customers, instead of using third party dealers is likely to have a strong impact on further development of the whole logistics industry.

RS: The potential is certainly in increasing effectiveness of transport. This is a field, on which Dachser constantly works and creates new mechanisms bringing win-win solutions to all involved parties – effective processes, lower costs and lower emissions.

MD: The potential lays in provision of value-added services because simple transport from the point A to the point B is not enough any more. For the customer today much more important are secondary services linked with transportation, for example reporting, online solutions and general communication with its trade partners, which the carrier carries out on behalf of the client. Also ISO certificates are very important. ISO 9001 is today an inevitable base of a transportation company and ISO 14000 and ISO 18000 are welcomed pluses. A sign of a good transporter is that it can offer all these for still acceptable prices.